ESMA’s proposals for simplifying prospectuses

23 / 04 / 2018

On 3 April 2018, the European Securities and Markets Authority (ESMA) published the final report of its Technical Advice (TA) under the new Prospectus Regulation, covering the format and content of the prospectus, including the new Universal Registration Document, the EU growth prospectus, and the scrutiny and approval of prospectuses.

As reported previously (see New Prospectus Regulation), the Prospectus Regulation entered into force on 20 July 2017, replacing the Prospectus Directive 2003/71/EC, as amended. It aims to simplify the current prospectus regime, particularly for smaller companies. Most of the provisions of the Prospectus Regulation will apply as of 21 July 2019.

In its report, ESMA proposes a wide range of changes to ease requirements for issuers in order to reduce the cost of issuing capital while at the same time introducing additional disclosure requirements deemed necessary for investor protection.

The TA (available here) reflects the outcome of three consultations and provides for some amendments to the draft technical advice in light of the feedback received from stakeholders. Subject to endorsement by the European Commission (EC), the TA will form the basis for the delegated acts to be adopted by the EC by 21 January 2019.

Next steps

In a next step, ESMA will provide technical advice on the minimum information content of documents describing a merger or a takeover by way of exchange offer. You may recall that the Prospectus Regulation provides for a prospectus exemption where securities are either offered to the public or admitted to trading on a regulated market (or both) in connection with a takeover by means of an exchange offer, or in connection with a merger or division. This exemption is conditional on a document being made available to the public containing information “describing the transaction and its impact on the issuer”. ESMA’s technical advice on this document is due by 31 March 2019.

Finally, depending on the outcome of the Brexit negotiations, the UK may upon leaving the EU at the end of March next year be considered a ‘third country’. Issuers domiciled in a third country may only carry out an offer of securities to the public or an admission to trading on a regulated market in the EU using a prospectus drawn up under the laws of that third country provided that the EC has taken an ‘equivalence decision’, i.e., a decision stating that the information requirements contained in the laws of the third country are equivalent to the information requirements of the Prospectus Regulation. Such issuers can then elect a home Member State and, provided it has concluded cooperation arrangements with the relevant supervisory authorities of the third country, i.e., in the case of the UK the FCA, the competent authority of this home Member State can then approve the prospectus drawn up under the laws of the third country. Such a prospectus can benefit from the EU passport.

ESMA will provide technical advice on the general equivalence criteria to guide future assessments of national laws of third countries in relation to disclosures when securities are either offered to the public or when an admission to trading on a regulated market is sought. This is due to be delivered to the EC by 31 August 2019.